Orion Energy Systems of Manitowoc, known for its innovations in lighting and energy-efficiency technology, has adopted Amory Lovins’ concept of “negawatts,” energy not generated, in an innovative contract to help industries save on energy and money in tough economic times. Lehman said the school is 27% more energy efficient than a conventional facility.

The Orion Virtual Power Plant supply agreement allows customers the benefits of deploying Orion technology by purchasing the negawatts as Orion delivers them. Lovins’ negawatt concept is based on investing to reduce electric demand, rather than increasing electricity generation.

“There’s no financial risk; there’s no technological risk to the end user,” explained Dan Waibel, president of Orion Asset Management, “as Orion owns the technology and is responsible for ensuring that it delivers the negawatts with no issues.”

Orion Energy Systems of Manitowoc, known for its innovations in lighting and energy-efficiency technology, has adopted Amory Lovins’ concept of “negawatts,” energy not generated, in an innovative contract to help industries save on energy and money in tough economic times. Lehman said the school is 27% more energy efficient than a conventional facility.

The Orion Virtual Power Plant supply agreement allows customers the benefits of deploying Orion technology by purchasing the negawatts as Orion delivers them. Lovins’ negawatt concept is based on investing to reduce electric demand, rather than increasing electricity generation.

“There’s no financial risk; there’s no technological risk to the end user,” explained Dan Waibel, president of Orion Asset Management, “as Orion owns the technology and is responsible for ensuring that it delivers the negawatts with no issues.”

Waibel said even in an economic downturn, a business has to keep the lights on if it intends to keep the plant open. Since lighting accounts for about 10% to 35% of the electricity used by a manufacturing plant and 75% of a warehouse, a reduction in the energy bill frees up cash for other uses. “Customers start to get cash flow from the energy savings right away,” he added.

Here’s how the Virtual Power Plant works. The Orion customer signs an agreement to purchase negawatts that result from installation of Orion equipment at a fixed rate that is lower than the existing utility rate. The length of the agreement is based on how long it takes to deliver the negawatts. After the predetermined negawatts are delivered, the customer assumes ownership of the equipment and continues to benefit from the energy saved.

Because the Orion Virtual Power Plant is so innovative, the company is collaborating with the Foley & Lardner law firm to obtain patents on it.

The new contract comes after Orion’s net income dropped 59% in the second quarter of this year as some customers closed plants or delayed capital purchases. The company, founded by Neal Verfuerth in West Bend in 1996, had grown from sales of $2 million to more than $80 million. It made its first public offering of stock in December 2007. It is in the process of moving its corporate headquarters from Plymouth to a new building next to its manufacturing plant in Manitowoc. Orion’s projected revenue growth for 2009 is 0% to 9%.

Mark Spletzer of Steiner Electric in West Bend said that while he’s sold Orion Virtual Power Plants to customers, the concept of the contract initially goes against the grain of some conservative Wisconsin business people. “It seems too good to be true,” he said. His clients traditionally pay upfront for new capital equipment.

Orion’s energy-efficiency technologies can reduce lighting energy consumption for a company by 50% or more. The company has obtained 18 patents for its innovations over the years. Orion customers, which include 100 of the Fortune 500 companies, have saved more than $455 million in energy costs and nearly 6 billion kilowatt hours. Based on EPA estimates, Orion systems have prevented the emission of more than 4 million tons of carbon dioxide, more than 16,000 tons of sulfur dioxide, 6.2 tons of nitrogen oxide and 159 pounds of mercury.

Cost reductions and improved lighting can come from three phases of deploying Orion’s technology. Orion’s basic lighting platform reduces the base energy load by 50%. In a second phase, Orion installs controls that provide the “intelligence” to automatically turn off lighting when the building is unoccupied or during predetermined off periods. A third phase involves installing light pipes, which let in direct sunlight. Controls automatically sense the level of light from the light pipes, and when the level is sufficient, can turn off the electric lighting.

The Virtual Power Plant contract is a creative answer to current challenges in that it reduces a company’s fixed costs, provides better lighting and helps the environment at no risk to the customer. At the same time, it promises to improve Orion’s bottom line.

By John Hill

You can contact John Hill by e-mail at jhoythill@sbcglobal.net.